Sustainable Luxury: New Opportunities for Growth

Since September 2008, many devoted luxury shoppers have been hiding their shopping bags. Customers feel conflicted about what they really “need” in this new economic landscape, discouraging purchases that previously wouldn’t have garnered a second thought. In addition, customers increasingly seek to align their purchases with their social values and sustainable lifestyle.

This new consumer mindset poses an interesting challenge to luxury brands. While on the one hand, global luxury sales have rebounded nicely with projected growth of 10% in 2010, on the other, this uptick does not necessarily translate into profitability over the long term.

As the aging Baby Boomer population scales back on its spending, and more awareness develops around where products come from and how they are made, the luxury sector will have to seek out alternative growth strategies. In this era of consciousness around spending habits, specifically amongst the socially and environmentally aware Gen X and Y’rs who wield the new spending power, luxury brands have a lot to gain by conveying they are committed to corporate social and environmental responsibility. In previous years, a marketing executive at Hermes might have balked at the idea of diluting brand image by suggesting to customers they are “green”. However, the values luxury brands stand for align perfectly with green practices. The se include timelessness, durability, innovation, craftsmanship, and a meaningful brand and retail experience — all characteristics that mirror the underlying goals of sustainability and social responsibility.

Today, CEO’s and brands are asking themselves a new set of questions: How do we position our products to reflect this new customer mindset? How do we preserve our DNA while taking a sustainable approach? What should we do internally so that the message of conscious branding is understood, integrated and transmitted throughout our organization?

Some prestige brands are leading the charge in this capacity. Kate Spade, the accessories and handbag company, has launched an extraordinary effort with Women for Women International in order to promote job opportunities in Afghanistan. The women employed by the program will create bracelets with the goal of developing long-term growth and stability in the country. Nordstrom, one of the nation’s leading fashion specialty retailers, is using their new location in New York to test a retail concept devoted to philanthropic efforts that will donate all proceeds to non-profits. And despite the fact that Levi’s is marketed as a brand with mass, as opposed to designer, appeal, their commitment to sustainability within their supply chain merits attention. The new “Water Less” denim line will utilize washing and finishing techniques that use 28 to 96 percent less water, depending on the style, than the 42 liters of water it now takes to produce the average pair of jeans.

By examining their supply chains and core values and translating that into intelligent messaging and operational practices, luxury brands can enjoy the advantages of being both profitable and sustainable.These strategies can help them reach new customers and breathe new life into the industry for decades to come.

Sequoia Lab is a boutique consulting firm powered by the strength and reach of the Sequoia tree. We partner with companies to create innovative, profitable, and sustainable business models and build brands that speak to a new generation because they are intelligently grounded, full of energy and inspiring in their reach.

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